Agriculture-tech funding up on increasing use of data

CHENNAI: Increasing smartphone penetration and availability of low cost data and resulting inclusion of farmers in the information economy has made agriculture-tech startups a darling of investors.

Data from research firm Tracxn shows agri-tech sector has already crossed $100 million worth investments in just the first seven months of 2019 compared to $163 million in full year 2018. Further, investments in agri-tech startups grew almost six times (6x) from 2016 to 2018.

While 37 deals were recorded in 2018, 2019 has already registered 21 deals. Startups creating market linkages for agricultural products contributed to over 90% of the deal count and value in 2019, Tracxn data shows. Other segments that attracted investors are farm business management software, supply chain tech, and startups leveraging AI and other tech for precision agriculture.

Digital is helping transform the way farmers derive value from their output, and solving the “information asymmetry” in the sector. There is more acceptance of new-age agri-tech solutions as scalable businesses today, entrepreneurs said.

“Investors now view India as a playground for agri-tech solutions that have the capacity to go global,” Tauseef Khan, co-founder and CEO, Gramophone, said. This is a huge change from 2016 when entrepreneurs found it tough to get meetings with investors with an agri-tech idea, he added.

Gramophone provides actionable insights to farmers via an app and call centre and raised $3.5 million in August from Info Edge, Asha Impact, Better Capital, and others. The startup claims to reduce cost of cultivation by average 15%-20%, and increase farmer yield by 30%-40%. Rohit Sood, principal, Bertelsmann India Investments, said scalability of agri-tech businesses are not a challenge anymore. Most ventures today also fall under the B2B model, where unit economics are strong without need to burn huge cash on customer acquisition, he said. Bertelsmann recently led a $28 million Series C funding round in Pune-based direct to farmer tech platform AgroStar.

Karthik Jayaraman, co-founder and CEO of agri supply chain venture WayCool Foods, says startup business models in the sector are beginning to crystallise and the product-market fit has been established. “The availability of good quality data, farmer wise will also hopefully assist lenders in estimating risks better and increase their lending into this value chain,” he adds.

Interest for agri-tech has moved beyond impact investor community that traditionally backed the sector.

Today, mainstream venture capital firms insist on field visits and choose to interact with the farmer community as part of the evaluation process, Khan said.

In a recent study, tech body Nasscom noted that there are over 450 startups in the sector, growing at the rate of 25% year-on-year, compared to over 3,000 agri-tech startups globally. However, funding is estimated to have grown twice (2x) globally (from 2013 to 2018) compared to almost ten times (10x) in India.

“With recent rise in funding, 48% agri-tech CEOs believe to have the next agri-tech unicorn in the coming three years,” Nasscom said.

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